Is there an investment vehicle that can take advantage of broad stock market moves that doesn't nail you on capital gains distributions (investing on non tax deferred account)? My fear on buying something like SPY is that it will have a major capital gains distribution where I get taxed on gains I didn't even participate in. I know an alternative would be to put my own stock portfolio together, but just wondering if there was already something like that out there (perhaps like Berkshire Hathaway stock?).

Thanks in advance.

Not to be too technical, but SPY is a Unit Investment Trust.

Its the legal structure of a product that matters. Open ended funds (like mutual funds) generally have to pay out their capital gains to avoid being taxed inside the product. Closed end products (ETFs and UITs) are generally much more tax efficient.

There's something to be said though for paying some gains at cap gains rates along the way whether through reasonable distributions or booking gains. That way you don't end up in a situation where your portfolio has tripled over a few decades and every dollar of withdrawal is taxable.

And BRKB isn't like replicating the index. An index of industrials & financials maybe. Not sure why this is such common belief.

mosdefn14 said:

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And BRKB isn't like replicating the index. An index of industrials & financials maybe. Not sure why this is such common belief.

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uhhh you realize 40% of their portfolio is AAPL?

And that 40% is what keeps it from just following a blend of XLF, XLI and XLP

What are everyone's thoughts on putting together a stock portfolio of consumer staples companies (Clorox, Kimberly Clark, Proctor and Gamble etc.)? These might become attractive if the market dips a bit more. These companies have good track records of a decent dividend and I would think these sorts of companies will do well with continued government money printing which I don't see stopping soon.

Bonfire97 said:

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What are everyone's thoughts on putting together a stock portfolio of consumer staples companies (Clorox, Kimberly Clark, Proctor and Gamble etc.)? These might become attractive if the market dips a bit more. These companies have good track records of a decent dividend and I would think these sorts of companies will do well with continued government money printing which I don't see stopping soon.

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VDC

Product summary
Seeks to track the performance of a benchmark index that measures the investment return of stocks in the consumer staples sector.
Passively managed, using a full-replication strategy when possible and a sampling strategy if regulatory constraints dictate.
Includes stocks of companies that provide direct-to-consumer products that, based on consumer spending habits, are considered nondiscretionary.

RockOn said:

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VTI / VTSAX hasn't had a cap gain distribution in like 2 decades. Vanguard seems to have nailed down their process to avoid cap gain distributions.

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https://www.bloomberg.com/graphics/2019-vanguard-mutual-fund-tax-dodge/

cool write up on their method for distributing appreciated shares out of the funds via etf creation units.

it was not behind a paywall for me. this is why i chose vanguard several years ago.

RockOn said:

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VTI / VTSAX hasn't had a cap gain distribution in like 2 decades. Vanguard seems to have nailed down their process to avoid cap gain distributions.

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They perfected it & no one noticed until last yr or two...

The etf architecture allows for excellent tax mgmt regardless of when you purchase.

Bonfire97 said:

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Is there an investment vehicle that can take advantage of broad stock market moves that doesn't nail you on capital gains distributions (investing on non tax deferred account)? My fear on buying something like SPY is that it will have a major capital gains distribution where I get taxed on gains I didn't even participate in. I know an alternative would be to put my own stock portfolio together, but just wondering if there was already something like that out there (perhaps like Berkshire Hathaway stock?).

Thanks in advance.

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Bonfire, their are investment structures available that can reduce capital gains to the absolute minimum (0%). It would depend on your overall investment goals and future planning. Once we understand your objectives we can map out a tax strategy to reduce liabilities and reinvest without a tax consequence.

The key is to be in control of how much you pay to build real wealth.